US Should Adopt Germany's Short-Selling Bans: Spiropoulos

Germany's ban on certain types short sellling should be adopted in the United States to prevent the type of volatility that hurts investor confidence, Bill Spiropoulos, CEO of Corestates Capital Advisors, told CNBC Thursday.

AP

Traders at the New York Stock Exchange

“When you see stocks being blasted with flash trading, it destroys market confidence," Spiropoulos said.

Naked short selling is when the seller doesn’t actually own the underlying security at the time the deal is done and has been criticized for making highly stressful financial circumstances worse.

Executives Lehman Brothers and Bear Stearns pointed to short sellers for undo pressure on their sotcks, and more recently, the Greek government has blamed credit default speculators for worsening their economic situation.

"The roller-coaster activity makes people run to the sidelines, they have no interest in investing,” Spiropoulos said.

Stopping “Bear Raids”

“I absolutely think they should pull those boys back from bear raids," he added.

"It turns the marketplace into a casino, just like in the 1930s. They used to run a stock from $50 to zero and there was no one there to stop them.”

Proponents of short selling argue that they provide a valuable warning signal to alert other market participants of potential problems. Selling also creates a two-way market for asset prices, and increases liquidity.

But Spiropoulos did not take issue with what he said he considers legitimate short sellers, focusing more on sellers he said attempt to take advantage of the system.